Exxon Can Block Shareholder Climate Proposal, SEC Rules

The Securities and Exchange Commission (SEC) will allow Exxon to block its shareholders from voting on a proposal calling on the oil giant to set and disclose targets for reducing greenhouse gas emissions.

The SEC decision, which was issued Tuesday, is in response to a shareholder submission filed in January by the New York State Common Retirement Fund, the Church of England and dozens of co-filers, asking Exxon to set a series of emission targets that would align its business plan with the goals of the Paris Climate Agreement.

In an effort to sidestep the proposal, Exxon sent a letter to the SEC asking for permission to block a shareholder vote on the proposal, which it said was “vague and misleading” and would undermine its management responsibilities.

In its decision, the SEC agreed with Exxon and said passage of the proposal would “micromanage” the company.

Andrew Logan, senior director of oil and gas at the sustainability nonprofit organization Ceres, said investors will continue to push for disclosure of the company’s plan to reduce emissions.

“Contrary to the SEC’s incorrect determination that the resolution amounted to micromanagement, what shareholders are really looking for is large-scale realignment of the company’s business plan to address climate-related risks,” said Logan in a statement.

Exxon said it released the requested targets in its 2018 Energy and Carbon Summary, which was released after a landmark investor vote passed in 2017. The resolution forced the company to produce an annual report that details how the company will be impacted by global efforts to align with a reduction in greenhouse gas emissions under the Paris Climate Agreement. The report downplayed the threat posed by international climate goals, which prompted the latest shareholder request.

Exxon is facing a growing number of climate change-related lawsuits and investigations related to its climate change disclosures.

The Rhode Island attorney general filed suit against the company and four other oil companies last July for knowingly contributed to climate change and failing to adequately warn Rhode Island citizens about the risks posed by their products. New York filed suit in October after a lengthy investigation found the company had deceived shareholders for years by deliberately downplaying the climate risks to their investments.

The Massachusetts Attorney General’s office is investigating whether Exxon deceived Massachusetts shareholders by failing to warn them of potential climate change-related risks to their investments and in March, the attorney general in Washington DC indicated the city is seeking outside legal counsel in support of an investigation and potential litigation against Exxon for possible fraud.

The company is also a defendant in more than a dozen climate liability suits brought by municipalities across the country.

What Exxon ultimately discloses could impact litigation, but the SEC’s ruling itself is likely to have little impact on the pending lawsuits and investigations.

“Companies frequently refuse to put shareholder resolutions to a vote, and in reviewing such refusals, the SEC applies technical rules that don’t have much bearing on the other sorts of climate cases pending against Exxon,” said Michael Gerrard, a professor of environmental and climate change law at Columbia University and chair of the faculty at Columbia’s Earth Institute.

Proposals urging companies to reduce their carbon footprint and be more forthcoming about the climate risks to their bottom line are on the rise and shareholders have grown increasingly concerned about climate liability suits and other climate-related risks to the companies’ bottom lines.

“While the SEC is limiting specific points that can be put in shareholder resolutions, investors are putting more specific and sophisticated requests before management,” said Timothy Smith, director of environment, social and governance shareholder engagement for Boston Trust and Investment Company.

Exxon did not immediately respond to a request for comment.

Other companies have complied with similar shareholder requests, including BP, which agreed in February to publish a plan by the end of the fiscal year outlining its strategy for holding temperature rise to well below 2 degrees Celsius and reducing carbon emissions to net zero by the second half of the century.

Logan said the SEC’s decision only deepens the fissures between Exxon and its investors, who remain undaunted in their efforts to engage the company on climate.

“The agency’s flawed ruling does nothing to stem the tide that has brought climate risk into the financial mainstream, nor does it change the reality that oil and gas companies must dramatically reduce greenhouse gas emissions and adjust to a carbon-constrained world,” said Logan.

Smith said the Exxon’s actions could fuel further calls for transparency.

“If anything, ExxonMobil has fueled the intensity of the critical scrutiny of their climate actions.”

[…] on the oil company to disclose targets for reducing greenhouse gas emissions. Notably, Exxon appealed to the SEC, and the agency ruled in the company’s favor, deciding that the shareholder resolution […]

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